November 18, 2011

Every time one of the Republican presidential candidates is asked about the Occupy Wall Street movement, the candidate expresses wonderment over what these people want and suggests that they occupy Pennsylvania Avenue instead.

It’s not a bad point, actually. The other day, on TV, they showed a Wall Street occupier waving a sign reading, “Tax the Rich.” If that’s what you want, then why are you waving your sign in lower Manhattan? Wall Street doesn’t tax anybody, especially itself. That’s what politicians do.

Moreover, if history is any guide, neither party is going to do that. The Republicans are shameless in their legs-in-the-air whoredom to big business, especially the financial industry. The Democrats aren’t much better.

Jim Webb, the Virginia Democrat who has decided to leave the U. S. Senate in apparent disgust and despair, wanted to raise the 15 per cent capital gains tax that allows Warren Buffet to pay a lower tax rate than his secretary, who lives on salary and not investment profits. That lower capital gains tax rate is one of the factors that makes the rich rich to begin with and helps them stay that way. Webb’s Democratic party, which controls the Senate, refused to do that.

Webb also pushed a bill last year to raise billions in new taxes on executives of financial institutions that received at least $5 billion in federal bailout money. That plan also never came up for a vote.

The people stomping around Zuccotti Park in lower Manhattan, Academy Park in Albany and other locations around the country have a legitimate grudge. The Wall Street people were largely responsible for this financial crisis that has one in five people out of work and one in five homeowners in the country owing more on their mortgages than their house is worth. And the Wall Street people whose recklessness created the crisis have prospered spectacularly ever since the taxpayers bailed them out to the tune of nearly a trillion bucks. Meanwhile, many of those taxpayers have sunk into financial ruin.

But raging around public places, waving signs and peeing on bushes doesn’t accomplish much – especially if you’re not sure what you want to accomplish in the first place. If the Occupy Wall Streeters would like a little clarity on this issue, here it is:

After the dust settled on the financial crisis and the last presidential election, Congress passed the Dodd-Frank bill. In simple terms, it did the following:

1) Consolidated regulatory agencies;

2) Tried to create comprehensive regulation of financial markets, including increased transparency of derivatives, the sort of securities that triggered the crisis;

3) Created a new consumer protection agency and strengthened investor protection;

Later on, at President Obama’s request, Congress added a measure that forbids banks in which ordinary people deposit money from investing more than 3% of their basic capital in private equity and hedge funds and imposed other restrictions on investment practices.

And that solved everything, right? Well, not quite.That legislation ignores the role that government played in creating the crisis. The government helped bring on the recession by keeping interest rates too low when housing prices soared out of sight and by distorting the housing market through lax credit standards used by Fannie Mae and Freddie Mac. Moreover, the government permitted some banks to grow so big that their failure would collapse the world economy, and nobody has done a damned thing to fix that – not the Republicans, of course, but not the Democrats, either.

More than three years after the financial crisis began and Congress had to bail out the banks, the six largest American financial institutions are significantly bigger than they were before. These banks now have assets worth over 66% of this country’s gross domestic product, up from 20% of GDP just a decade ago. Institutions that large pose a persistent and conspicuous risk to the world financial system, and – contrary to what the Republicans claim – offer value to the economy woefully insufficient to justify that risk.

It’s true that the very size of these banks, and the certain knowledge on the part of lenders that the federal government will never let them go belly up, keeps their borrowing costs lower by about half a per cent. The banks maintain that they need that borrowing edge to compete against foreign banks. The only problem with that argument is that foreign governments are cracking down on their banks in a big way. Among other things, governments in Switzerland and the United Kingdom are making their banks retain more capital as a hedge against risky investments.

Oh, but wait a minute. If the government forces the big banks to break into smaller pieces so the taxpayers can ignore them if they fail, isn’t that socialism? Well, that’s true only if you believe that antitrust laws, enacted more than a century ago, constitute socialism. And keeping banks small enough to fall victim to capitalism if they screw up strikes me as true capitalism. As of now, the banks enjoy the benefits of capitalism without its risks because they know that the taxpayers, in a pinch, will save them through socialism.

Hedge funds and private equity funds go down all the time when they screw up. Who cares? They’re not too big to fail. Make the banks live the same way.

And ordering them to break up isn’t the only way to solve the problem. Another would be to do what the Brits are considering doing – imposing a hefty tax on banks whose size exceeds a certain percentage of the nation’s economy. Proceeds from that tax could then go into a special reserve fund to bail out banks too big to be permitted to fail. You also could end the tax deduction that banks get on interest payments to discourage them from borrowing so much.

The reality is that there exist all sorts of solutions to the problems of a banking industry grown so enormously fat that if they topple they flatten the entire economy when they come crashing down. There exist also all sorts of solutions to the problem of income inequality that now threatens to destroy the American middle class, not the least of which is to tax income earned through investment more justly compared to income earned through labor.

What are the odds of any of that happening with the bought-and-paid-for politicians we have in both parties in Washington right now?

November 4, 2011

Normally, I let individual politicians say what they want to say without comment from me. Enough people understand by now that these people will say whatever they think their target audience wants to hear.

I’ll make this exception, though, this time. I’ll do it for Sarah Palin. Why? Because she routinely has demonstrated a public capacity for missing the point that’s so staggering, so breathtaking in its magnitude, so awe-inspiring in its sheer scope, that it borders on some sort of misguided, nit-witted grandeur.

So, the other day Palin was in Lake Buena Vista, Fl., talking to a bunch of Republican political contributors, and she took that occasion to say that the Occupy Wall Street crowd is only after “a bailout” from the government.

Well, excuuuuuuussse me, but I was under the impression that the Occupy Wall Street crowd was complaining because they can’t find paying jobs. I have that impression of their desires because – pay attention, now, Governor Palin – I actually READ A NEWSPAPER NOW AND THEN!

There’s little question that Sarah Palin is a talented woman. She has charm, warmth and a gift for pushing the right buttons with blue-collar, Joe-the-Plumber types who don’t really understand what’s going on but have plenty of opinions about it. It’s my distinct impression, though, that if she actually were to try to read more than two or three sentences at a stretch her head might explode like the bomb the Enola Gay dropped on Hiroshima. I base that assessment on what I’ve heard her say on TV about Paul Revere – you might want to look that up, by the way – and the opening shots of the American Revolution. (Google that one, too, if you want a real chuckle.)

Look, there are plenty of complaints to be leveled against the Occupy Wall Streeters. Too many of them seem to be Jew haters. That’s a disease of the left these days more than of the right. Some of them are more or less out-and-out commies. Some are every bit as nuts just on general principles as some of the loonies who showed up at the Tea Party rallies. They’re also pushing too hard now that they’ve made their point in cities across the country. For them, it’s time to settle down and get organized, as the Tea Party got organized before them.

Most of them, though, are just people who believe that Wall Street was largely responsible for the recession that has left 15 million people out of work in this country. Most of them simply want to find regular jobs and earn a paycheck. Most of them feel that this has gone from the Land of Opportunity to a land divided more and more into poor and rich – extremely rich, actually. And, unlike previous generations of Americans brimming over with optimism and faith in the system, they believe that if you weren’t rich when the recession hit, you never will be.

Their big complaint is that that the political system is now so frozen with partisanship and so tightly controlled by big money that it doesn’t work for most Americans – that it instead works mainly to aid the super rich in becoming ever richer. Like the Tea Partiers, they’re horrified that the government gave the reckless Wall Street bankers nearly a trillion bucks in loans with no strings at all and that the Wall Street barons are now rolling in cash while working class people are losing their homes and savings.

The big differences between the two groups are age – the Tea Partiers skew older – and education. The Occupy Wall Streeters have more schooling, and they have the college loan bills to prove it. But they don’t have jobs. That’s what they want – not bailouts from the taxpayers like the lords of Wall Street got after they screwed up.

The Tea Partiers at least had a plan to make things better – cut federal spending ruthlessly. Their solution is overly simplistic and depressingly incomplete, but at least they had a solution and the drive to push to make it work. That’s where the Occupy Wall Streeters have fallen down. Maybe, once winter chases them off the streets, they’ll smarten up and start to get organized. And maybe not.

It’s unlikely that Sarah Palin will smarten up, though. If she was going to display any intellectual horsepower my guess is that it would have happened already. She’s still seething because Katie Couric asked her on TV three years ago what she read.